Analyzing UK Fashion Retail Industry Changes

The assignment provides an in-depth analysis of the UK fashion retail industry, focusing on key changes within the sector. A PESTEL analysis is conducted to identify changes in the macro environment, while micro environment factors such as customers, competitors, suppliers, and investors are also examined. The report discusses various strategies for adapting to change, including social and technological innovations, and recommends awareness, profit gain, and market capture for Next. Additionally, the Wheel of Retailing theory is applied to the UK fashion retail industry.

Retail Theory and Practice

Table of Contents
INTRODUCTION...........................................................................................................................1
Introduction to company.............................................................................................................1
Key relevant challenges within the UK fashion retail................................................................2
Relevant changes within the micro environment........................................................................3
Strategies and tactics that could be used in adapting changes....................................................4
Recommendation.........................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Retail is the process of selling consumer goods or services to customers by using various
different methods or channels of distribution in order to earn profit. Retail business sell finished
goods to customers in exchange for money and retailers satisfy demand of the consumers by
identifying their needs through a supply chain. Retailing involves a direct interface with the
customer and the coordination of business activities from end to end right from the concept or
design stage of a product or offering, to its delivery to the consumer. Fashion retailing is a
process of retailing that includes selling clothing, appeal and accessories. It can be a group of
companies and a part of fashion supply chain that goes from the manufactures to the consumer,
offering goods and services through traditional seasonal spans and according to the fast fashion
timing. This assignment is based on Next Plc., it is a British multinational clothing, footwear and
home products retailer headquartered in Enderby, Leicestershire. This assignment discusses
about key relevant changes within the UK fashion retail, relevant changes within the micro
environment and discussed strategies or tactics that could be used in order to cope up with such
competitive challenges (Baker and Saren, 2016).
Introduction to company
Next Plc was founded in 1864 by Joseph Hepworth and it has around 700 stores of which
519 are in UK and 200 across Europe, Asia and Middle East. It produces or manufacture
fashionable and trendy apparel according to the consumers’ demand both men and women. This
company designs, manufacture and distribute clothing and home furnishing and accessory items
to nearly 330 Next retail stores and through the company's Next directory mail order sales
catalogue. There are 49,033 employees working under it.
There are various different strategies and tactics adopted by Next Plc in order to adopt
changes effectively. The company rapidly, becoming pioneer for the development of chain stores
in Britain. In its fashion products, the organisation is created best designs and collection
according the needs and demands of its consumers. In fashion retail sector it also have various
competitor such as Mango, Gucci, Zara and various national and international brands (Bodie,
2015). Next operations are divided into complementary activities, retail stores and catalogue
sales. These operations of Next plc provided more than £821 million of the company's total sales
in 1998 while representing more than two thirds of operating profit. Prinkmark is on track to
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overtake Next as the UK' second biggest clothing retailer currently after strong sales over the
winter. Low prices, aviator jackets, children's clothing and new make-up ranges helped this
retailer store outperform rivals. Prinkmark holds a 6.9% share of the clothing market by value,
compared with Next at 7.1%.
Key relevant changes within the UK fashion retail
Retail is a process in which retailer sells the goods and services to customers by using
different distribution channels to earn money or gain profit. Retail sector is the only one largest
sector which provide employment to individuals in UK at a large level and this happened cause
of globalization. High demand of the customers have lead change in the fashion retail industry
and Next plc should analyse different macro and micro environmental factors that help the
company to identify the changes in fashion retail (Pantano, 2014). To find out changes in macro
environment, company can use PESTEL analysis which as described:
PESTEL analysis
Political environment- This factor basically related to government rules and regulations
and the UK government play an important role in it because change in interest rate, exchange
rate etc. affect positively and negatively to the business of the company. Government taxation
policy can reduce the profit margin on products and services. For example, in UK interest rates
stand at an all time low of 0.5%. This may be seen as a positive change for Next Plc. as company
can expand their presence within market place without considering high taxation policies
formulated by government.
Economic environment- This macro environment factor related to the inflation rate, saving
rate, foreign exchange rate and economic cycle of the country and company both. The whole UK
economy is facing recession and is very sensitive to changes in interest rates, this can influence
Next Plc. in form of prices have to drive down most of the time. Along with economic condition,
bank policies also affect the purchasing power of the consumers. In Next, better and flexible
bank policy and healthy economic condition can increases purchasing power and sales of the
company that positively affect the economic condition of the company. For example, in 2011,
high global inflation had an impact on the sales and profit margins of Next Plc. In 2011 as rising
inflation predominantly in fuel and food began to limit consumer spending.
Social environment- Class structure, hierarchy and power structure, culture, education
level, consumer's interest, demographic and skill level of population are related to this factor.
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There are various social and culture changes taking place in UK such as lifestyle changes,
income distribution, labour or social mobility and fashion change which may have a high level
impact upon the performance of Next. In UK a change occur relate to lifestyle of the people and
they demand products according their lifestyles. This created positive impact on the organisation
because the demand of high quality products increase that increase the profit and productivity of
the company.
Technological environment- This macro environment factor create impact on the
business of retail fashion industry (Badot and Filser, 2013). For example, in last few years, the
internet, mobile smart phone technology and social networks have grown and provide
technological platforms that represents new avenues for sales acquisition and marketing of the
Next Plc. Paperless operation, use of latest machinery to produce products and various channels
of distribution are the technical factor that influence the retail industry and make available
flexibility in the operation of the business.
Environmental environment- This factor is related to weather, climate change, air and
water pollution regulation, wastage and recycling etc. Next operates its business in different
countries by following the environmental laws such as water and air pollution (Hayes, 2018).
Next Plc recognises the current trends in consumers and governments demanding businesses to
reduce their carbon foot prints. Due to pollution act, a change occur in the organisation to reduce
the wastage and recycle it and this organisation is committed to reducing its by minimising
recycling waste, lowering transport emissions and packaging in some of their products. This
create positive impact on the firm in such manners, it minimize the production cost and manage
the wastage or inventory or help in increasing productivity and profit of Next.
Legal environment- It is totally based on rules, regulation, laws, legislation and various
policies of the government. In Next, it is related to different laws such as employment law,
discrimination law, health and safety law and data protection law or others. If company enter in a
new market, it follows these laws to provide protection to its business and its employees so that
the organisation can run its business properly in competitive market or increased sales of the
company. For example, the government of UK increased VAT from 17.5% to 20% and this
affected Next Plc because it meant that product pricing increased by adding to higher operating
cost. Increment in minimum labour rates in the UK and in those countries where Next
manufactures some products meant the organisation is spending more on wages.
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Relevant changes within the micro environment
Micro environment includes all those factors that affect business strategy, decision
making and performance of the company. In it company include customers, suppliers,
competitors, employees, shareholders and media. Change within the micro environment can be
understand by these micro factor and they are discussed below:
Customers- They are those people who buy or purchase goods and service of an
organisation. It is the most important factor of the micro environment and direct impacted the
business of the company. In Next Plc, they are the central part of the business because a
consumer is the ultimate user of the product and services of it and any organisation can not
survive without its customers. For example, In Next Plc, changing attitude of the customer cause
of culture, beliefs and attitude influence the business of the company. It is the major and essential
factor of fashion industry for driving it and producing a variety of clothes according to the
customers’ demands and preferences.
Competitors- They are other organisation, people, brand and business which compete
with each other for both markets and resources (Ryan, 2012). Next Plc also have its competitor
such as Zara, Gucci, Prada and others. Next must know to do a competitive analysis of
competitors and have competitive advantages because if the organisation has knowledge about
which kind of technology and strategies are used by its competitors, the company can also make
improvements in its strategies and attract more customers. For example, if Next use online
distribution channels strategies and technology like Zara, it creates positive impact on the
business of the company.
Suppliers- It is the another micro environment factor or elements that play an important
role in fashion retail industry and influences the business of the organisations (Nepal and
Jamasb, 2015). In Next Plc, suppliers are those people that provide raw material to the company
for producing or manufacturing products and services. For example, if the suppliers increases
their prices of raw material, it will impact the marketing mix strategy of the company and sales
also.
Shareholder- They are investors and they have an influence as the organisation want
investors to operate a business. They share the risks of operating and often gain support and
expertise. For example, in Next Plc, their demand for raise in profit can influence the business
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success in a long run. If the influence is in positive way, it impacted positively or in from of
profit. On the other hand, it impacts negatively in form of losses and risk.
Competitor analysis
Next Plc face various issues related to competition from big rival brands and companies
that are existing with in the retail industry. They create competition for this company in both
terms such as price and quality of the products. This attract more consumers towards them and
decrease the sales and productivity of the firm. In fashion retail industry, high price are attach
with the high quality of the fabric and others which are effective in gaining the attention of
customers.
Illustration1: The fashion pyramid
Source: The fashion pyramid,(2019).
Strategies and tactics that could be used in adapting changes
There are various changes facing by the fashion retail industry from micro environment
and micro environment factors which make force on retailers to design quality products to desire
low and flexible price for maintaining the profitable position of the company. By analysing the
macro environment factors it has been analysed that technological changes can be adopt by the
company in context to increase sales and capture large market share for increasing the profit and
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productivity of Next. There are various different strategies and tactics adopted by Next Plc in
order to adopt changes effectively.
Social Changes- Cause of globalization, there are various changes occurs in consumers demands
and tastes related to products and services according to their culture, beliefs and values etc. To
make long term sustainability and run the business in the market, Next Plc adopt various changes
and attract more consumer towards it products and services (Mackellar, 2013). Next Plc adopt
various strategies, they are as following:
 In order to overcome with the social changes such as consumers taste & preferences,
needs & demands, values, culture and beliefs, the company adopted customer focused
strategy and provide products according their needs and demands by doing market
analysis. With this, the organisation attracts more consumers and provide satisfaction to
their needs by designing clothes according their culture, attitude and beliefs (Brigham
and et. al., 2016).
 By using differentiation strategy, the company cope up the change of competition and
distinguish the products from their competitors. With it, the company manufacture
different product from their competitors by making innovation in their existing products
or manufacture new products.
 By analysing the demographic change such as political and economic environment,
related to legislation, tax rate, interest rate etc., it has been analysed that the company
produce product according government trade and tariffs rules and adopt this changes or
generating revenue.
Technological Changes- Change in promotional channels such as as internet, Facebook,
Instagram, social media are related to technology, strategies and others that can be used or adopt
by the company to increase growth of the organisation and fulfil consumers’ demands. There are
various strategies that can be used by Next to adopt and overcome changes, they are as
following:
 Next develop online business models which complement traditional bricks and retail
establishments. This company used it to make the delivery process easy so that it can
attract more customers and provide information about its products and services by using
this e-commerce site.
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 Next Plc can use cost leadership strategy by which it can reduce its production cost and
latest innovative technology, machinery and equipment that can make production process
easy. By adopting it, the company can produce latest design products according its
consumers demands and needs.
 In context of overcome or adopting technological change, the organisation can use
innovative and updated technology to meet the consumers demands and increase profit
and enhance productivity of the company.
Strategies for meeting micro environment changes
For it, Next Plc can use or adopt lower pricing strategy towards its products and not be
make change or sacrifice with quality of the products and services (Hristov and Reynolds, 2015).
The company can do market research and produce products according the consumers’ needs and
demands. By adopting different channels of distribution such as online, internet etc. company
can easily aware the consumer with the products and earn profit by its sales or increase
productivity of the firm.
Use of Appropriate theories
It is necessary and important to know and understand the concept of retailing in order to
complex business environment (Rafiq, Lu and Fulford, 2012). There are various theories for it
but here discussed about the wheel of retailing theory, it is as following:
Wheel of retailing
It is a theory that is used by organisation to explain the institutional changes that take
place when innovators, including large business house, enter the retail arena. This concept of
retailing devised by Phillip Kotter that sates a full wheel: usually beginning as low margin, low
price and low status operations. This theory describes that how retailers approach to capture
market share and create brand value. There are four steps in this theory, they are as following:
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Source: The Wheel of Retailing, (2019).
Establishing and penetrating in the market- In this step, according to this theory, pay
attention towards the new retailers that enter the market with low price, low margins and low
status (Klaus and Nguyen, 2013).
Expanding in the market- During the time of gain more experience of the market, these
retailers can enlarge their consumers with the purpose of increasing sales, gaining profit margin
by acquiring significant market share.
Stabilized business model attracting margins- In this step, the company is already
established in the market and earn profit by using high price and high cost strategy. It is the most
profitable stage for Next because there more demand than supply.
Entry of another retail competitor- This is the last stage, in which another retail
competitor enters in the market who challenges, and then brings down the original. In this stage
cost is high for the original retailer and price are also high.
This theory helps Next Plc in observing that retailers can follow this cycle in order to
increase its profits and capture the market at large level. Next can analyse its competitors and
accordingly adopts to changes.
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Illustration: The Wheel of Retailing

Recommendation
From the above detail it has been analysed that for enhancing the productivity and
profitability of retail company Next Plc should adopt changes in context to operate business or
survive in the complex business environment till long term. Recommendations are as following
in context of Next Plc:
 Next can increase its online presence because now these days’ customers prefer online
shopping. By using internet and online technology it can provide information about its
products and services. It can be launched and deigned any application where consumer
can get fashionable products and purchase them.
 By using various distribution or advertisement channels such as social media, Facebook,
Twitter, Instagram and others, Next Plc can make promotion of its products and create
awareness about the products and services.
 By developing an application and provides convenience to buy 24*7, the company can
increase its sales and help the customers to compare the products with their competitors
that help Next in enhancing its profitability (Baker and Saren, 2016).
CONCLUSION
In this assignment concluded about the retail stores that they are expanding their business
at high level and provide employment to the individuals. In this report explained about key
relevant changes within the UK fashion retail and PESTEL analysis defined in order to
identifying changes in macro environment. Micro environment factors such as customers,
competitors, suppliers, investors are explained from which relevant changes occurs in retail
industry. Various strategies and tactics that can be used by Next for adopting change such as
social and technological are defined and the wheel of retailing theory are also defined. Apart
from it, recommendations are also described in order to create awareness, gain profit and capture
large level of market.
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REFERENCES
Books & Journals
Badot, O. and Filser, M., 2013. Re-enchantment of retailing: toward utopian islands. In
Consuming experience (pp. 175-190). Routledge.
Baker, M. J. and Saren, M. eds., 2016. Marketing theory: a student text. Sage.
Bodie, Z., 2015. Thoughts on the future: Life-cycle investing in theory and practice. Financial
Analysts Journal. 71(1). pp.43-48.
Brigham, E. F., and et. al., 2016. Financial Managment: Theory And Practice, Canadian
Edition. Nelson Education.
Hayes, J., 2018. The theory and practice of change management.
Hristov, L. and Reynolds, J., 2015. Perceptions and practices of innovation in retailing:
Challenges of definition and measurement. International Journal of Retail &
Distribution Management. 43(2). pp.126-147.
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Klaus, P. and Nguyen, B., 2013. Exploring the role of the online customer experience in firms'
multi-channel strategy: An empirical analysis of the retail banking services sector.
Journal of Strategic Marketing. 21(5). pp.429-442.
Mackellar, J., 2013. Participant observation at events: theory, practice and potential.
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Nepal, R. and Jamasb, T., 2015. Caught between theory and practice: Government, market, and
regulatory failure in electricity sector reforms. Economic Analysis and Policy. 46.
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Pantano, E., 2014. Innovation drivers in retail industry. International Journal of Information
Management. 34(3). pp.344-350.
Rafiq, M., Lu, X. and Fulford, H., 2012. Measuring Internet retail service quality using ES-
QUAL. Journal of Marketing Management. 28(9-10). pp.1159-1173.
Ryan, P., 2012. Apprenticeship: between theory and practice, school and workplace. In The
future of Vocational Education and Training in a changing world (pp. 402-432). VS
Verlag für Sozialwissenschaften, Wiesbaden.
Online
The Wheel of retailing. 2019. [Online]. Available Through: <https://www.marketing91.com/the-
wheel-of-retailing-concept/>.
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